Can you be giving more to your grandchildren?
Grandparents are often very giving to their grandchildren. They are very inclined to give to them financially and this is perfectly fine if you have it to give. Leaving money for them is a great way to make sure that they are taken care of and give them a head start in life. Giving more to your grandchildren in a smart way can have great financial benefits.
The first rule of thumb is to get your child’s input before splurging on your grandchildren. This is most likely a no-brainer to some, but getting their parent’s input is important because you need to know how they feel about any large gifts you are giving.
Many grandparents want to shower their grand kids with money during the holidays. This can be very tempting to do but saving money for them instead could be more impactful. One way you could do this is by purchasing cheaper gifts for them on Christmas and setting aside money you would give them into an investment fund. Not only will the money grow to sizable amount by the time they can legally use it, but their parents (your children) will most likely be grateful to you. This could significantly reduce the burden of them paying for their child’s tuition or living expenses once they become college-aged. Using plans such as a 529 plan can give you significant tax benefits and aid with their tuition. Almost every state has 529 plans available for you to choose from. These plans work very similar to a Roth 401K plan in that you can invest your money on an after tax basis. These plans can be used to fund public or private tuition in most cases.
Consider savings bonds, or investment funding. If you don’t know your grandchildren’s future plans of attending college post-high school you can always put your money to work in other ways. A savings bond is a government issued bond that offer a fixed rate of steady interest over a fixed period of time. Once the allotted time has passed the bond can be issued to the bond holder to use how they wish. Alternatively.
Grandparent’s Trust: Trusts can give you more about on how and when your grandchildren can have access to money that you set aside for them. They are generally simple to start but it should be noted once they are in effect you can’t reclaim your money. A trust allows you to write out instructions to your grandchildren and the trustee on how you would like the money to be used.
Be reasonably generous with how much you are giving especially if you are contributing financially to multiple grandchildren. Make sure that you have enough money to take care of your own personal needs and that you aren’t pulling money from your retirement funds.
Know the laws when it comes to the limits on the amount you can gift to grandchildren. According to Nerd Wallet, in 2019 and 2020 you can only gift up to $15,000 per year to your grandchild. If you give more than this you may end up having to pay a gift tax.
Make the most out of your gifts to your grandchildren by finding more ways to make your hard-earned money stretch farther. Consult with an SJK Wealth Management advisor to learn more.